Dynamic Comparative Advantage, Directed Mobility Across Sectors, and Wages

Stéphane Auray, David Fuller, Damba Lkhagvasuren and Antoine Terracol

No 2017-59, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper argues that evolving comparative advantage is important not only for worker ?ows across sectors, but also for wage growth and lifetime earnings. First, the main individual-level relationship between sectoral mobility and wages is established using Panel Study of Income Dynamics. Second, a dynamic, stochastic multi-sector model with worker-sector match productivity is introduced to account for the relationship. In the model, a sector may experience simultaneous in?ows and out?ows of workers that are much larger than the corresponding net ?ows. Movers tend to have a lower wage than nonmovers both prior to, and after the move. Wages grow with sectoral tenure. Those who move more frequently tend to have lower lifetime earnings. Recent movers are more likely to move again. Labor mobility decreases with labor market experience. All these predictions of the model are consistent with data, but generated by a remarkably simple, evolving match productivity shock.

Keywords: stochastic multi-sector model; labor mobility; sectoral mismatch; labor income shocks; lifetime earnings; return to tenure; autoregressive processes (search for similar items in EconPapers)
JEL-codes: E24 J24 J31 J62 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2017-08-05
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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